The District of Columbia Court of Appeals heard oral arguments Thursday morning on whether an allegedly fraudulent petition made to a federal agency is enough to extend jurisdiction to non-local parties in the city's courts.
Under the District's long-arm statute, non-local parties can be sued in a local court if they have local ties, such as doing business here or owning property. Precedent has long held, though, that if that party's only contact with the city is through the federal government, it isn't usually enough to extend jurisdiction.
A case pending in U.S. District Court for the District of Columbia is challenging that rule, known as the government contacts exception. After losing on jurisdiction in the trial court, the plaintiffs appealed to the U.S. Court of Appeals for the D.C. Circuit. The D.C. Circuit found that since this was an unsettled question of interpreting the D.C. Code, the local court of appeals should step in and issue a ruling.
The plaintiffs are a group of Brazilian producers of materials used to make steel. As previously reported in The National Law Journal, the Brazilian companies have accused U.S. producers of giving fraudulent information to the Washington-based U.S. International Trade Commission and manipulating the commission into imposing import duties on foreign producers in the 1990s. The duties were lifted in 1999, when the commission reported that it had received "false, misleading, or incomplete" information from U.S. producers.
Bruce Cohen of Philadelphia’s Meredith Cohen Greenfogel & Skirnick, arguing for the Brazilian plaintiffs, told the three-judge panel this morning that when a party comes into the city with the intent of committing fraud against another company, the long-arm statute should apply. The injury to the Brazilian plaintiffs “emanated” from the alleged fraud at the trade commission, Cohen said.
District of Columbia Court of Appeals Judge John Fisher asked Cohen whether that logic would open the door to creating jurisdiction for anyone who makes a misrepresentation to the federal government. What about spin from local lobbyists, Fisher asked, “are we going to be entertaining all those cases?”
Cohen said that the law differentiates between “puffing” and fraud, and also that the cases he has in mind would involve a party accused of making those representations under oath to a federal agency with the intent of harming another party, as opposed to off-record chatter.
Eckert Seamans Cherin & Mellott partner Dale Hershey argued on behalf of the U.S. producers. Hershey said that the purpose of the long-arm statute is to offer relief to Washington residents who believe they were harmed by a non-local party doing business in the city.
Chief Judge Eric Washington asked Hershey why the local courts shouldn’t want to handle these types of fraud cases, since judges here are more familiar with federal agency actions and it “would be a nationally appropriate forum.”
Hershey said that such a rule would hurt the due process rights of non-local defendants, who would find themselves in a local Washington court for any contact they had with the federal government, regardless of whether the plaintiff could have sued in another state.
Judge Kathryn Oberly also heard the case.